The implementation of Tax-Free Childcare, the new government scheme to help working parents with the cost of childcare, is being rolled out to eligible parents in stages.

The scheme first made its debut in April 2017 and although there have been initial systems problems, HMRC’s aim is to have the scheme open to all eligible parents by 14 February 2018. Application is made online through the Childcare Choices site www.childcarechoices.gov.uk and applications can be made for all eligible children at the same time.

Under Tax-Free Childcare, for every £8 the parent pays, the government provides a £2 top-up, to a maximum of £2,000 per child each year – with a higher limit of £4,000 for disabled children. This gives a total childcare pot of £10,000, or £20,000 for disabled children. To be eligible, parents must generally have minimum weekly earnings of at least £120 each. There is also an upper earnings limit of £100,000.

Compensation may be available in certain circumstances where a parent:

is unable to complete an application for Tax-Free Childcare

is unable to access their childcare account

or doesn’t get a decision about whether they are eligible, without explanation, for more than 20 days.

Those employing a nanny should be able to use the childcare account to pay their PAYE tax and National Insurance. Delays in getting this system working may also give grounds for compensation. Application is made online GOV.UK childcare-service-compensation

I must admit that for most of my career to date I didn’t really think much about maternity leave and pay. While training to be an accountant, just getting on with the job (apologies if that sounded a little like Theresa May!), it wasn’t really on my radar. There did however come a point when I started thinking about it and realised that I didn’t really know anything about it, so here’s the basics:

Who is entitled to maternity leave?

Any employee with an employment contract is entitled to maternity leave, no matter how long they have worked for their employer, as long as they give notice of the date they want to start their maternity leave at least 15 weeks before the baby is due.

How long is maternity leave?

Maternity leave is split into ‘Ordinary Maternity Leave’ and ‘Additional Maternity Leave’ which total 52 weeks.

All new mothers must take at least 2 weeks off after childbirth (or 4 weeks if they are a factory worker) but do not have to take the full 52 weeks.

When does maternity leave start?

If there are no complications with the pregnancy, the employee can choose when to start maternity leave, but the earliest it can be started is 11 weeks before the expected week of childbirth (EWC). If the baby is born early, leave starts the following day; it will also start automatically if the employee is off work for pregnancy-related illness in the 4 weeks before the EWC.

What about maternity pay? Who is entitled to that?

To be entitled to Statutory Maternity Pay, the employee must be on the payroll in the ‘qualifying week’ (the 15th week before the EWC) and have worked for that employer for at least 26 weeks before that week. In addition, they must provide proof of their pregnancy (a MATB1 form usually obtained from their midwife around the midpoint of the pregnancy) and earn at least £113 per week (gross) in the 8 weeks before the qualifying week.

Therefore not all those that are entitled to maternity leave will get maternity pay from their employer, but they may be able to get Maternity Allowance from the government instead.

How much is maternity pay?

Statutory maternity pay is payable for up to 39 weeks as follows:

The first 6 weeks: 90% of the gross average weekly earnings (AWE)

The remaining (up to) 33 weeks: £140.98 or 90% of the AWE (whichever is lower)

So while maternity leave can be up to 52 weeks, statutory pay isn’t for that whole time.

Maternity pay is paid in the same way as wages, with tax and national insurance deducted.

Additional contractual maternity pay, over the minimum statutory amount, can also be paid and is common in some industries and the public sector (for example 6 months at full- or half-pay).

What about Dads?

As a Mum-to-be myself I have focused this blog on maternity aspects, but Dads have an entitlement too! Dads are entitled to up to 2 consecutive weeks of leave but it can’t start before the birth and must finish within 56 days of the birth (or due date if the baby is early). Statutory Paternity Pay (SPP) is paid at the lower of £140.98 per week or 90% of average weekly earnings.

Alternatively, a couple may choose “Shared Parental Leave” – our Payroll Manager, Becky Edwards wrote a blog earlier in the year specifically on this subject please click here to read this.

Unpaid Parental Leave

Many people don’t know that this exists! Parents who have been with their employer for over a year can take unpaid time off to look after their child’s welfare, for example to spend more time with the child, settle them into nursery or look into schools. It is available for a total of up 18 weeks per child, up to their 18th birthday. It must be taken in whole weeks, at a maximum of 4 weeks at a time, unless the employer agrees otherwise.

Unpaid parental leave can be taken at any time (subject to giving 21 days notice) right from the birth of the child, so can be used in conjunction with maternity, paternity or shared parental leave.

The Employer Perspective

Employment rights continue while an employee is on maternity leave, for example the right to employer pension contributions, returning to a job and paid holiday (which accrues while on maternity leave at the employee’s number of days worked prior to leave, even if they come back to work part-time).

You can reclaim at least 92% of SMP/SPP paid to employees – this increases to 103% if you qualify as a Small Employer (if you paid less than £45,000 in Class 1 National Insurance in the previous tax year). The reclaim should be calculated by your payroll software and deducted from your PAYE/NI liability for the tax month, however if you can’t offset it in full you can ask for a repayment, but not until the start of the next tax year.

Shared parental leave (SPL) allows employed parents and adopters to share leave and pay with their partner to care for children from birth until their first birthday.

Only employees can take SPL; they must have a partner (separated partners still qualify if sharing responsibility for care of child at the time of birth)

SPL allows mothers (or adopters) to shorten their maternity leave (and pay) to share the leave (and pay) with their partner in order to care for children in their first year; it is the mother’s choice whether to share leave

The mother can only share with one person; it is her choice provided her partner satisfies the qualifying conditions

Even if only one parent is entitled to SPL and/or ShPP (e.g. one is self-employed or not entitled to ShPP), the other partner may still be entitled to SPL/ShPP if both satisfy the qualifying conditions

The employee taking SPL must have been employed 26 weeks by the 15th week before the expected week of childbirth and remain employed in the week before the start of SPL. Their partner must also satisfy an employment and earnings test

At least 8 weeks’ written notice must be given to end maternity leave and start of SPL

SPL can only be taken a week at a time but can start mid-week. SPLIT days can be used to work part-time by agreement with employer

SPL can be taken by both parents at the same time or at separate times; they must decide how to take it. The mother can remain on maternity leave while the partner is on SPL

SPL can be taken in up to three separate blocks (unlike maternity leave) or more if the employer agrees

There are detailed notice provisions which must be followed

Employees can work for up to 20 days during SPL (SPLIT days), as well as 10 days during maternity leave (KIT days). These must be agreed with employer.

SHARED PARENTAL PAY (ShPP)

Can pay be transferred as well as leave?

Yes. Statutory maternity pay (SMP) is available to female employees from the 11th week before the expected week of birth or the actual birth if earlier. It is paid for 39 weeks (the maternity pay period – MPP) with the first 6 weeks being at 90% of pay (and then either the flat rate of £139.58 or 90 per cent if this is lower for the remaining 33 weeks. But, only 37 weeks is available for ShPP as the mother must take the first 2 weeks after the birth. Women who do not qualify for SMP will often qualify for maternity allowance which is paid at £139.58 or 90 per cent of average earnings if this is lower.

If you wish to discuss any of this in more detail please contact us 0116 2423400